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Can a Small Biz Make It Online?

By Alexandra DeFelice
Aug 3, 2006 5:00 AM PT

Small businesses have their share of difficulties, but do they have any chance of succeeding in a world dominated by eBay, Amazon and the like? The short answer is yes -- if they combine the right mix of technology, marketing and customer service.

Can a Small Biz Make It Online?

"The goliaths of the online world are everywhere. The biggest struggle young companies face when bringing their business online is getting noticed," Chris Hall, marketing programs strategist and tactician for Chris Hall Marketing, told the E-Commerce Times.

Nana Bonsra, CEO and cofounder of Priceshoppe.com, can back up that statement firsthand. Her consumer electronics, computer software and hardware company started out as a brick-and-mortar store in a small town outside of Charlotte, N.C., but she soon realized the competition was too fierce -- especially with a Wal-Mart and BestBuy located in the neighborhood.

The company was doing poorly, so she decided to relaunch it as an online-only retailer, investing about US$100,000 in inventory, technology and infrastructure. Since the site's debut in April 2006, Priceshoppe.com's 15 employees have served more than 1.6 million customers with 8,000 SKUs. The business will generate roughly $2 million in sales by the end of the year, Bonsra estimates; she plans to take the company public in fall of 2008.

Overcoming Hurdles

"Some of the biggest challenges were getting the right technology at the right prices and finding a team of individuals who believed that we could make any money in such a crowded space," Bonsra told the E-commerce Times. "We are a pure-play entity, so we have to be able to deliver information to our customers in a timely fashion, and the ability to do that depends on a state-of-the-art technological infrastructure."

Building a Web site is undoubtedly a huge hurdle to overcome, but tools like eBay's ProStores help alleviate this problem somewhat, Sucharita Mulpuru, senior analyst at Forrester Research, told the E-commerce Times.

Other areas of concern include buying and housing the inventory, managing the fulfillment and customer service, and driving customers to the site. "Paid search or SEO (search engine optimization) is really the most effective way, but those are difficult and expensive," she said.

Limited marketing budgets are to blame for most of the challenges small businesses face when deciding to go online, acknowledged Sonal Gandhi, SMB marketing analyst at JupiterResearch. That said, several companies now cater to the online marketing needs of small businesses.

Available Resources

"These companies offer services as diverse as business listings on online directory services, such as MerchantCircle, to Web-hosting services combined with search engine marketing, and analytics such as Affinity," Gandhi told the E-commerce Times. "Growing competition in this area is making online marketing more affordable and accessible for small businesses."

Some of the more sophisticated Web hosting and e-commerce packages already come with basic analytics, Gandhi said, and if companies want more than the basics, vendors like Visistat cater to the SMB market.

Sometimes the best way for a small company to go is to offer a niche product. Companies like golfballs.com, batteries.com and neeps.com (the ferret store) are good examples of success stories, according to Mulpuru.

Creating community sites by incorporating blogs, message boards and wikis is also an effective strategy, she said, as long as the person in charge is passionate about the topic.

Once established, it makes sense to invest in at least a basic analytics package and understand conversion rates, which pages are the most popular, and what products are the best-sellers, Mulpuru said. "Then companies can look to big competitors for where to expand to next, and which customer-friendly features it may make sense to integrate next."

Deciding which payment options to accept also presents a challenge, Ed Kountz, senior analyst for payments at JupiterResearch, told the E-commerce Times. Smaller merchants must consider the costs of accepting e-payments online and the number of options they need to accept to best target customer needs.

"Merchants should go where the dollars are, and that means start out with credit and debit and PayPal, then move to prepaid/gift and arguably deferred cardless billing [like] BillMeLater," he said.

Back to the Basics

As they become immersed in all of the technological research, SMBs must not lose sight of the basics, however.

"We have invested a substantial amount of financial resources in our marketing initiatives and this gets us noticed on the Web, but at the end of the day we are able to turn lookers into buyers through aggressive pricing, and buyers into customers by offering . . . great customer service," Bonsra said of Priceshoppe.com's success.

Whenever a customer encounters a shipping problem, the company assigns the case to one of its sales representatives, who gives the customer a cell phone number where they can be reached and periodically checks on the customer until the case is resolved.

For customers who are more comfortable online than on the phone, Priceshoppe offers a live chat option, an increasingly important component of customer service.

The bottom line is that companies cannot grow without maintaining positive customer relationships.

"Most small companies overlook the most important growth dependency -- customer input," Hall said.

"Rather than commission ongoing and professional solicitations, most executives in these companies will presume they know what their customers want. On the contrary, only with continuous customer feedback and insight surveys can a company extend their services [to meet] their customers' needs," she concluded.


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